The Chief Secretary seems to have been saying that he knows that the system is a rotten one, arbitrary and unfair, but, a terrible mistake having been made in March, it is the best system that the Treasury could cobble together in a hurry before something respectable is done in the forthcoming Budget. We agree that it is a shabby way of attempting to deal with the company liquidity problem and accounting at a time of inflation. We are trying to find out more precisely from the Chief Secretary with what he proposes to replace the system. We do not wish to anticipate his right hon. Friend's Budget, but the Chief Secretary argued against the Amendment chiefly by saying that there is something better in the pipeline which will put it right.

Will the Chief Secretary please cease talking about reliefs? We are talking not about a relief for the corporate sector but about getting away from a system in which, because of inflation, companies are taxed on phoney profits, which are not genuine profits but the paper creation of a mixture of inflation and orthodox accounting principles of the so-called "doomsday machine" which are putting respectable, profitable and efficient companies into bankruptcy. A measure to prevent that happening because of the high degree of inflation is not relief but a measure of justice. May it be established that we are not talking about measures of relief but about measures taken to avoid imposing ever higher burdens of taxation at a time of rapid inflation?

Will the Chief Secretary make clear that what he is talking about as a replacement for this one-off Clause is not merely a more refined system of providing for the element of inflation in stock appreciation to be taken into account but inflation accounting in the fullest sense, taking into account the effect of depreciation, which is a major point in company accounts and profits, and that it will be introduced in the forthcoming Budget? Will the right hon. Gentleman say that it will not be confined to stock appreciation, important though that is, but will be introduced regardless of whether the Sandilands Committee has reported by that date? We want full inflationary accounting. It is a form of indexation. The Chief Secretary knows the importance attached by many Opposition Members to indexation at a time of rapid inflation, not merely for the corporate taxation sector but for individuals.

When the matter of corporate liquidity was discussed in Committee on the Finance Bill eight months ago, the Government's attitude was summed up by the Paymaster-General. I do not wish to pick on the Paymaster-General, who is probably the most well-informed member of the Treasury team on economic matters, but he said: I turn now to the question of company liquidity. There was a discussion about Government statements on company liquidity, and figures were given as to the net position compared with the figures which the Government had quoted after taking account of company indebtedness. The £14,000 million referred to as the current company indebtedness, which is to be set off against liquidity figures stated by the Government, is not expected to be called in. He came to the astonishing conclusion that we had no evidence of a serious liquidity problem. He went on to say: If there were to be such a problem, that would obviously be a factor of which we should have to take account. Later he said: According to our information, there is much liquidity in the possession of companies."—[Official Report, 21st May 1974; Vol. 874, c. 232–4.] That was manifestly nonsense at the time and it is now. Was it bigotry? It could hardly have been unawareness of the fact of inflation. Surely it could not have been lack of awareness of the consequence of inflation on profits. It could not have been unawareness of the existence of the rigid Price Code and price control which existed then and is continuing to cripple company liquidity.

How did the Government manage to get it so wrong then, and what is their view now? Do they think that there is a serious liquidity crisis now? Do they think that Clause 16 is adequate, or do they think that further steps need to be taken to improve company liquidity at a time when there will be a chain reaction of bankruptcies, starting with smaller companies because they are not so likely to be bailed out, if something is not done to recognise the position of British industry?